Getting Rid of Steve Wynn Could Help the Gaming Company in Giant Macau Market

Daniela Wei and Bruce Einhorn, Bloomberg

- Feb 10, 2018 5:00 pm

Skift Take

The new license was going to be tough, and Wynn’s behavior would have been a factor. The hotel giant needs to make sure it has serious and talented management in place now that he’s gone – he can’t be secretly operating behind the scenes.

— Jason Clampet

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Billionaire Steve Wynn’s resignation as head of his gaming empire may alleviate some concerns over the future of Wynn Macau Ltd.’s license in the world’s biggest gambling hub.

Wynn Macau’s permit is up for renewal in 2022, and Macau regulators are preparing to outline the process for casino-license bidding later this year. Allegations that Wynn pressured employees for sex — which have drawn scrutiny from regulators in the U.S. and Macau — complicated Wynn Macau’s status in the former Portuguese enclave that generates the bulk of Las Vegas-based Wynn Resorts Ltd.’s profits.

While Wynn’s resignation isn’t a guarantee that the casino operator will succeed in keeping its license, some industry watchers see it as a positive step.

“It takes off the pressure as far as Macau is concerned,” said Pedro Cortes, a senior partner with the Macau law firm Rato, Ling, Lei & Cortes.

Wynn Macau shares climbed as much as 6.8 percent in early trading in Hong Kong on Thursday, resuming trading after being suspended the previous day. The stock had tumbled as much as 17 percent after the sexual harassment allegations were reported last month. Wynn Resorts stock jumped 8.6 percent in U.S. trading Wednesday.

In the wake the sexual-misconduct allegations, the casino mogul on Tuesday stepped down as chairman of Wynn Macau and parent Wynn Resorts. Wynn, 76, has denied any wrongdoing. Matthew Maddox, the 42-year-old president of Wynn Resorts, was named chairman at both companies.

Here are the issues facing Wynn Macau as it navigates the scandal in the only Chinese territory that allows casinos:

Suitable Qualifications

Macau’s gaming law stipulates that the reputation of the operator and its controlling shareholder is considered in the bidding process for licenses.

In the meeting, the officials made it clear that major shareholders, directors and key employees must meet suitable qualifications. The regulator said in the statement it would “strictly enforce the relevant stipulation” and will continue its review.

“Macau’s regulator has emphasized it needs to make sure if the key persons of casino operators are suitable,” said David Bonnet, partner at Delta State Holdings Ltd. Before Wynn’s resignation, his presence on the board presented a “major risk” for shareholders as the casino operator’s license faced expiration.

Shareholdings

Wynn’s resignation may not be enough to satisfy regulators in Macau, since the gaming law’s suitability clause applies to major shareholders as well as executives and directors, according to Wang Changbin, director of the Gaming Teaching & Research Center at Macao Polytechnic Institute.

“If Steve Wynn is considered not suitable, according to the law he should give up his shares,” Wang said. Wynn remains in control of about 21 percent of parent Wynn Resorts, which owns 72 percent of the Macau company.

Wynn may be required to divest his shares in Wynn Resorts due to the jurisdictional review process, said Bonnet. Regulators in Nevada and Massachusetts are also probing the allegations against Wynn.

Wynn Branding

While Wynn is stepping down from the company he founded, his name remains on the casino properties. The company could face more challenges on branding, because of Wynn’s strong affiliation with it.

“They will have to relook at rebranding to something that sounds very similar to what it currently is,” said Ben Lee, a Macau-based managing partner at Asian gaming consultancy IGamiX. “Win or Winners, or maybe even Wing Lei,” he said, referring to the Chinese pronunciation for Wynn.

There are no plans to change the name of the casino company despite Wynn’s departure, according to a person familiar with the matter.